Ingredient price hikes prompt Express Scripts to slash coverage of compounded drugs

July is already turning into a major month for the future of drug compounders. Having been given 5 new FDA guidance documents to mull over last week, the industry has now been hit by news that pharmacy benefit manager Express Scripts ($ESRX) is to slash its coverage of compounded medications.

On September 15, Express Scripts will drop coverage of 1,000 drug ingredients commonly used in compounded drugs, an action the pharmacy benefit manager forecasts will drive a 95% drop in employer spending on the medications. The decision is partly motivated by doubts about the effectiveness of compounded drugs--particularly topical creams and ointments to treat pain and other conditions--and partly by the rising cost of the medications. Having assessed these costs and concerns, Express Scripts has decided many compounded drugs represent bad value.

Glen Stettin

"What we are eliminating is, pure and simple, wasteful spending. These drugs are being used when there are other things available that are already approved by the FDA and are less expensive," Express Scripts SVP Glen Stettin told The Associated Press. Over the past two years, Express Scripts' spending on compounded drugs increased 370%, a rise it attributes to inflation of ingredient prices. The price of 13 ingredients has increased more than 1000%, Express Scripts claims, with many more experiencing triple-digit rises.

The price rises occurred from the first quarter of 2012 to the first quarter of 2014, a period in which the drug compounding industry was rocked by a fungal meningitis outbreak that left 64 people dead. FDA has since tried to gain greater oversight of compounding pharmacies, but nobody is attributing the price rises to a push by compounding pharmacies to raise standards. So far only 14 of the 3,000 compounding pharmacies in the U.S. have signed up to be regulated by the FDA. The national law allows, but doesn't force, compounders to sign up with the FDA.

Massachusetts lawmakers are trying to tighten oversight in their own state--which was the location of the fungal meningitis outbreak--by giving the pharmacy board the power to do unannounced inspections of compounders. Reuters reports that lawmakers passed the bill. Governor Patrick Deval is now reviewing the planned legislation.

- read the AP article
- here's Reuters' piece